Thanks to new technological developments in the last ten years, mineral shale has opened up as a major new source of oil to feed the world’s growing energy appetite. According to this useful reference, the United States alone possesses the second largest reserve of shale oil and gas deposits in the world, with an estimated holding of 24.4 trillion cubic meters. Only China has a larger share of shale deposits. Argentina is third, with 21.9 trillion cubic meters in holdings.
What this means is that investment opportunities abound in exploration, extraction technology, refining and oil transport. There will also be profound shifts in geopolitical strategy connected to shale oil as the Middle East steadily fades in importance and Europe, the Americas, Northern and Southern Africa, India, China and Oceania become key regions for world energy production. Shale Oil is already the new bonanza and is imposing significant changes on the world market.
Investment opportunities are promising in Mexico, Chile and Argentina. It is true that the full exploitation of their shale reserves is hampered by a lack of infrastructure. There will be a huge need in all three of these countries for development in drilling and refining facilities, import of technology, import of expertise, and new construction of road, rail and pipeline transport. So ground-floor investment has huge potential here. Of course, the flip-side to all this potential is the difficulties imposed by some complex political difficulties in all three nations, particularly Mexico, that may hamper international private ownership.
China is launching a major initiative in shale development. Their mix of state and private enterprises allows for foreign investment and capital exchange on a large scale. Also, Chinese technology is state-of-the-art. This means immediate development and exploitation of shale fields is feasible, with lucrative payoffs in the offing.
Chevron, in partnership with the Argentine state-owned YPF S.A., has embarked upon a $1.24 billion shale project in the Vaca Muerta valley. This source is estimated to hold the equivalent of 23 billion barrels of oil and will probably be the focus of $15 billion in investments by 2020. However, there are legal complications. YPF’s former owner, the Spanish Repsol S.A. firm, is likely to sue over the nationalization of the company following the breakdown of settlement negotiations with the Argentine government. Until these issues are decided, the legal action could cast a cloud over the Chevron/YPF project and affect the investment picture down the line.